reports earnings today after market close. Among a handful of
storylines that will be closely watched
, the company's comments regarding its planned Gigafactory are
likely to take center stage -- especially after it was announced
and Tesla have finally signed an agreement for building the
factory. Here's what you need to know headed into the report.
A Tesla Supercharger station outside of the company's Fremont,
Calif., factory where it manufacturers its vehicles. Image
source: Tesla Motors.
What is the Gigafactory?
The primary goal for Tesla since the company went public is to
eventually produce a compelling mass-market electric vehicle.
That vehicle, Tesla says, is now three years out. But there's one
major problem: There is currently not enough lithium-ion
production to supply the company with enough battery packs to
make a car for the masses. Even worse, there isn't even enough
production scale to manufacture the battery packs cheap enough to
make an affordable electric vehicle with meaningful range
The solution to this production problem is Tesla's planned
Gigafactory, a facility "designed to reduce cell costs much
faster than the status quo and, by 2020, produce more lithium ion
batteries annually than were produced worldwide in 2013," as
Tesla said in the blog post announcing the factory.
With the help of unprecedented scale in lithium-ion battery
production, Tesla says it conservatively estimates that it can
cut battery costs by more than 30% once the factory goes live in
2017 and starts building the packs to support its more affordable
Rendering of Tesla's planned Gigafactory. Image source: Tesla
And here is the main reason investors are so interested in
Tesla's Gigafactory. By 2020, Tesla believes it can ramp up
production to 500,000 vehicles per year. That makes Tesla's 2014
guidance for 35,000 deliveries look paltry in comparison.
Tesla says the factory is going to require around $4
billion-$5 billion dollars of investment, $2 billion of which
will be invested directly by Tesla, with the rest shared by
Panasonic finally signs up
Tesla's biggest partner in the Gigafactory will be Panasonic. At
first, the electronic product manufacturer showed some skepticism
toward Tesla's project, even though it was already Tesla's
primary supplier of batteries. Though it's very possible that the
skepticism was only a mask to boost Panasonic's negotiating power
with Tesla in the deal.
Battery pack for Model S. The battery is built into the floor
of the vehicle. Image source: Tesla Motors.
But Panasonic is now officially on board, and the company will
play a major role in Tesla's Gigafactory:
Tesla will prepare, provide and manage the land, buildings
and utilities. Panasonic will manufacture and supply
cylindrical lithium-ion cells and invest in the associated
equipment, machinery, and other manufacturing tools based on
their mutual approval. A network of supplier partners is
planned to produce the required precursor materials. Tesla will
take the cells and other components to assemble battery modules
and packs. To meet the projected demand for cells, Tesla will
continue to purchase battery cells produced in Panasonic's
factories in Japan. Tesla and Panasonic will continue to
discuss the details of implementation including sales,
operations and investment.
Panasonic will occupy about half of the planned manufacturing
space in the Gigafactory, the report also says. The rest will be
occupied by key suppliers and Tesla's module and pack assembly
Tesla reiterated its goal of reducing costs in the report,
saying that the "Gigafactory is being created to enable a
continuous reduction in the cost of long range battery
Tesla chief technical officer and co-founder JB Straubel said
of the products the Gigafactory will enable: "Not only does the
Gigafactory enable capacity needed for the Model 3 but it sets
the path for a dramatic reduction in the cost of energy storage
across a broad range of applications."
Knowing execution on the Gigafactory is absolutely paramount
to Tesla's success, the company has previously said that it is
breaking ground on multiple sites before it chooses the
final location at the end of the year. Tesla is hoping this
strategy will speed up the construction process and reduce the
risk of delays.
It is possible that Tesla may have already broken ground on at
least one site. Investors will certainly prod Tesla CEO Elon
Musk during the call to see whether or not this is the
Model S outside of Tesla's headquarters in Palo Alto,
California. Image source: Tesla Motors.
Further, Musk said at the Tesla 2014 annual shareholder
meeting about a month ago that even Panasonic now believes a 30%
reduction in the cost of battery packs by 2017 is possible with
Successful execution on Tesla's Gigafactory would obviously be
not only a game-changer for Tesla, but also for the entire auto
Tune into the earnings call today at 5:30 PM EST
. Download the quarterly letter to shareholders when it is made
available after market close
. And for your pre-game, here are the key
to watch and
to follow when the results are made public.
More from The Motley Fool:
Warren Buffett Tells You How to Turn $40
into $10 Million
Tesla Motors, Inc. Announces Deal With Panasonic
on the Gigafactory
originally appeared on Fool.com.
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